Privatisation

Much of the literature makes empirical claims about privatisation on the basis of absent at worst, or rather shaky at best, definitions, perhaps believing its meaning to be clear. However, Starr (Reference Starr1988) points to the complexity of its definition, with privatisation having varied and at times unclear meanings. According to Drakeford (Reference Drakeford2000), privatisation is an overloaded term with limited analytical power. Maarse (Reference Maarse2006) argues that the study of privatisation in health care requires a conceptual framework to unravel its complexity and multidimensionality. Klein (Reference Klein2013: 123, 299) writes that the concept of ‘privatisation’ is more complex than political stereotypes or rhetoric would suggest, and is a ‘malleable term’ (see also Klein, Reference Klein and Johnson1988; Powell, Reference Powell and Seeleib-Kaiser2008).

Some accounts tend to conflate privatisation with cognate terms such as marketisation or commercialisation. However, Starr (Reference Starr1988) considers privatisation as shifts from the public to the private sector, not shifts within sectors such as the conversion of a state agency into an autonomous public authority or state-owned enterprise, or the conversion of a private non-profit organisation into a profit-making firm. He considers that both of these intrasectoral changes might be described as commercialisation, but this is sometimes a preliminary stage to privatisation. Within the NHS a number of commentators broadly argue that the NHS was ‘marketised’ rather than ‘privatised’ (in the narrow sense of asset transfer as in other areas such as state housing and national utilities) (e.g., Timmins, Reference Timmins2001; Marquand, Reference Marquand2004). However, others have pointed to marketisation, commercialisation and corporatisation (provider autonomy) as possible preludes or first steps to privatisation (e.g., Mohan, Reference Mohan, Gabe and Calnan2009; Gingrich, Reference Gingrich2011: 60; Lister, Reference Lister2013: 184, 200–201).

Different commentators tend to define privatisation in different ways. At one end of the spectrum, there are narrow, minimalist or ‘one-dimensional’ definitions (see below) that focus on the transfer of assets. Dictionary definitions tend to be narrow. Mathieson (Reference Mathieson2012) points out that ‘Collins’ defines privatise as ‘to transfer (the production of goods and services) from the public sector of an economy into private ownership and operation’, while the Oxford English Dictionary defines it as a transfer ‘from public to private ownership and control’. In terms of academic definitions, Crouch (Reference Crouch2003: 15) argues that privatisation occurs when ownership of a previous public resource is transferred to private firms, while under contracting out ownership remains with the public sector. In his view, Labour reforms in health involve partnerships and sub-contracting rather than privatisation. Similarly, Dunleavy (Reference Dunleavy1986: 13) defines ‘privatisation’ strictly as the permanent transferring of services or goods production activities, previously carried out by public service bureaucracies, to private firms or to other forms of non-public organisation, such as voluntary groups. He writes that

Other commentators take a broader perspective. Savas (Reference Savas1989) defines privatisation as ‘the act of reducing the role of government, or increasing the role of the private sector, in an activity or in the ownership of assets’. Starr (Reference Starr1988) writes that privatisation has come primarily to mean any shift of activities or functions from the state to the private sector, with the spectrum of alternatives running from total privatisation (as in government disengagement from some policy domain) to partial privatisation (as in contracting-out or vouchers). According to Le Grand and Robinson (Reference Le Grand and Robinson1984), privatisation involves a reduction in state activity in one of the areas of provision, subsidy and regulation. Drakeford (Reference Drakeford and Powell2008: 161) states that private welfare is understood in three main ways: ownership of assets, provision of services and the allocation of responsibilities between the state and the individual (see also Johnson, Reference Johnson1989; Drakeford, Reference Drakeford2000). Maarse (Reference Maarse2006) sets out four types: privatisation of provision, finance, management and operations and investment.

Young (Reference Young1986) presents a wide concept of privatisation, arguing that policies contain one or more of the following elements: current balance (size, scope, role); balance in the longer term by creating opportunities for the private sector to grow (e.g., by changing regulations); private resources to solve government problems (e.g., use of business practices); and increased market pressures to bear on the use of assets staying inside the public sector (e.g., internal and external competition). Using these four elements, Young argues that seven different forms of privatisation are identifiable in Conservative policy since 1979 (although he gives few NHS examples):

1. (a) selling off public assets

2. (b) relaxing state monopolies

3. (c) contracting

4. (d) private provision of services

5. (e) investment projects

6. (f) extending private sector practices into the public sector

7. (g) reduced subsidies and increased charges

Similarly, Savas (Reference Savas1989) sets out a taxonomy of privatisation strategies:

• • divestiture or outright sale of public sector assets in which the state divests itself of public assets to private owners;

• • franchising or contracting out to private, for-profit or not-for-profit providers;

• • self management, wherein providers are given autonomy to generate and spend resources;

• • market liberalisation or deregulation to actively promote growth of the private health sector through various incentive mechanisms; and

• • withdrawal from state provision, wherein the private sector grows rapidly as a result of the failure on the part of the government to meet the healthcare demands of the people.

None of these competing frameworks appears to command widespread acceptance. Peedell (Reference Peedell2011) argues that the government's health reforms fulfil ‘commonly accepted’ criteria for privatisation as they will result in increasing privatisation of the English NHS according to all of Savas’ (1989) five criteria. However, there are no ‘commonly accepted’ criteria for privatisation. It can equally be argued that according to ‘dictionary’ definitions, the government is not privatising the NHS (Mathieson, Reference Mathieson2012). According to Health Minister, Simon Burns (Reference Burns2012), opposition to change is part of the NHS's history, and there is ‘a weary familiarity to the rhetoric’. He sets out accusations of ‘privatisation’ from earlier years, such as 1988 and 1992, and states that if you look for ‘creeping privatisation’ and ‘NHS’ in the Hansard search engine, you will find over twenty-five years’ worth of parliamentary invective. Almost without exception, every major change to the NHS has been caricatured as a relentless march towards the end of free healthcare. He concludes that accusations of ‘privatisation’ and the ‘spectre of a US-style insurance system’ have become political grenades carelessly and indiscriminately lobbed at anything that looks like change. The NHS's history is peppered by their deployment, and to be frank, they’ve been so overused over the past few decades they’ve become rather meaningless.

At a very broad level, politicians tend to use the dictionary ‘minimalist’ definition of asset transfer in denying they are privatising the NHS, while critics tend to use a ‘maximalist’ definition in regarding any move from public to private as privatisation (see Powell and Miller, Reference Powell and Miller2013) (despite the fact that the NHS has contained some private elements since its inception). We now present three different frames or lenses that may increase understanding on the contested nature of privatisation.

Mixed economy of welfare perspectives

Narrow and broad definitions of privatisation can be seen in terms of the Mixed Economy of Welfare (MEW) literature. A one-dimensional analysis, focused on ownership, assumes that this is the only aspect that matters. A two-dimensional analysis focuses on ownership and finance. A 2×2 ownership/finance matrix appears in Keen et al. (Reference Keen, Light and Mays2001), Salter (Reference Salter2004) and Klein (Reference Klein and Maynard2005). A three-dimensional MEW examines provision, finance and regulation (cf. Le Grand and Robinson, Reference Le Grand and Robinson1984; Ascoli and Ranci, Reference Ascoli and Ranci2002). This broadly fits with studies of health care systems that focus on the dimensions of provision, finance and regulation (e.g., Scott, Reference Scott2001; Wendt, Reference Wendt2009; but see Maarse, Reference Maarse2006).

The three-dimensional model (Powell, Reference Powell and Seeleib-Kaiser2008: 18–19) differentiates between provision and finance across state, market, and voluntary and informal sectors. The third dimension, of state regulation, is indicated by inclusion of an H (high) and L (low) regulation. It can be used to explore movement between origin and destination cells to point to different types of privatisation (Table 1). For example, ‘full’ privatisation would entail movement across all three dimensions from Cell 1H (i.e., state funding and provision) with high regulation (through hierarchical power as there would only be public sector provision) to that of Cell 6L (i.e., market funding and provision) with low regulation. However, privatisation can involve any shift from the first (state) column, from the first (state) row, or towards less regulation (H to L). In principle, it can differentiate ‘privatisation’ (e.g., to private for-profit provision, cell 2), ‘voluntarisation’ (e.g., to voluntary, third sector or non-profit provision, cell 3) and ‘informalisation’ (e.g., to informal provision, cell 4). This is important if it is considered that for-profit provision is different to voluntary provision. For example, Mohan (Reference Mohan, Gabe and Calnan2009) differentiates ‘two visions of privatisation’ of markets and a ‘much more benign version’ or ‘progressive privatisation’ of mutual, social enterprises and cooperatives. However, the House of Commons Public Administration Select Committee (2008: 104) were unable to corroborate ‘the central claim made by the government, and by advocates of a greater role for the sector in service delivery’ that ‘third sector organisations can deliver services in distinctive ways which will improve outcomes for service users’. Moreover, it can be specific regarding ‘contracting out’ to a for-profit provider as ‘de-provided privatisation’, but precision may come at the cost of ugly terms.

TABLE 1.

Types of privatisation according to the MEW

The MEW literature has been little used to explore the privatisation debate, and tends to focus on social care rather than health care (e.g., Daly and Lewis, Reference Daly and Lewis2000; Ascoli and Ranci, Reference Ascoli and Ranci2002; Evers and Svetlik, Reference Evers and Svetlik1993). It is not clear if the informal dimension is applicable to health care, although it is a major feature of ‘caring’ within social care, particularly caring for children and for (elderly) adults (e.g., Harris, Reference Harris2002; Daly and Lewis, Reference Daly and Lewis2000). Moreover, public and private have other meanings in the sense of men's paid work in the public domain and women's unpaid work (including caring) in the private sphere (e.g., Harris, Reference Harris2002). For example, Daly and Lewis (Reference Daly and Lewis2000) focus on the way in which social care lies at the intersection of public and private (in the sense of both state/family and state/market provision).

The major disadvantage is that while the MEW provides a clear heuristic picture, it is difficult to provide clear measures as there is no obvious common metric. Privatisation can be seen as less state provision, finance or regulation, but while it is possible to measure provision or finance, regulation is more problematic (see below).

‘Wheels of Welfare’ (WoW) perspectives

A different three-dimensional view was set out by Burchardt (Reference Burchardt1997), and developed in subsequent publications (e.g., Smithies, Reference Smithies2005; Edmiston, Reference Edmiston2011; Burchardt, Reference Burchardt2013). She develops a typology of welfare services based on ‘wheels of welfare’ and attempts to illustrate its use by clarifying discussions about the privatisation of welfare and by analysing changes in expenditure. It identifies three dimensions of ‘private welfare’ – provision, finance and decision – each of which may operate independently of the others. The degree of decision-making power which consumers have is determined firstly by how directly they choose the service, and, secondly on the extent to which there are viable alternatives. Burchardt (Reference Burchardt2013) explains ‘decision’ as an element of ‘purchase’ which has two components: the funding of the service and the decision about which provider or how much of the service to buy. Burchardt (Reference Burchardt1997, Reference Burchardt2013) refers to the third dimension as ‘decision’, but Edmiston (Reference Edmiston2011) terms it control, which appears to bring the typology closer to publicness terminology. Burchardt (Reference Burchardt1997) discusses, but ultimately rejects, the dimension of regulation as it is not clear that regulation constitutes a dimension which is independent of provision and finance as all welfare providers are subject to regulation to a greater or lesser extent. She differentiates the ‘pure public’ category (i.e., tax-financed, publicly provided services under public decision-making) from the ‘other end of the spectrum’ of the ‘pure private’ (free-market) category, but also points to ‘contracting out’ (private provision, public finance and decision) and ‘voucher-type schemes’ (public finance, private decision and either public or private provision). A service can be ‘privatised; through “decision”: handed to the consumer, whilst the state retains responsibility for finance and possibly also for provision’ (p. 3).

Figure 1.

Wheels of welfare

Burchardt (Reference Burchardt2013) revisits the framework, discussing regulation as a candidate for a fourth dimension. She concludes that rather than adding a new dimension to the framework altogether, it would be interesting to look at the degree of regulation to which the privately provided, privately decided subsector is subject and how this has changed over time (pp. 10–11).

Burchardt (Reference Burchardt1997) uses the typology to analyse changes in expenditure on welfare by comparing spending in five main areas – education, health, housing, social security and personal social services – in 1979/80 and 1995/96. She notes the different mechanisms which are used to deliver welfare, with her ‘wheels of welfare’ differentiating between ‘outright privatisation’, contracting out, marketing public services, user charges and vouchers. Across all services, it is broadly agreed that shifts in the composition of welfare activity have been relatively small and gradual. (Burchardt, Reference Burchardt1997; Smithies, Reference Smithies2005; Edmiston, Reference Edmiston2011). Burchardt (Reference Burchardt2013) sums up that overall the picture is one of considerably greater stability than one might have expected given the rate of reforms in public services and plethora of initiatives in welfare under successive administrations.

In terms of health care, the figures for ‘pure public’ moved from 71 per cent in 1979/80 to 64 per cent by 2007/8, while the ‘pure private’ category increased from 9 per cent to 13 per cent. According to Edmiston (Reference Edmiston2011), the most notable changes are the increasing role of the pure private and public decision: contracted out categories of welfare activity. The rise in pure private activity is primarily due to the increase in consumer spending on over-the-counter medicines and private medical, dental, optical and nursing fees. The rise in ‘Public decision: contracted out’ is due to an increase in the number and scale of private finance initiatives, and the level of hospital care that is contracted out. Having said that, the proportionate change in these two categories still appears slight and gradual.

This approach appears to suggest two ways to examine change. First, a crude measure might examine whether change occurs in one, two or three dimensions. However, it is not clear if ‘third order change’ is inevitably more significant than ‘first order change’. Second, change can be measured in terms of expenditure. However, it is important to note critiques of expenditure as a ‘dependent variable’ (e.g., Esping-Andersen, Reference Esping-Andersen1990: 19–21). Edmiston (Reference Edmiston2011) notes that expenditure does not necessarily always capture the extent of activity within a given domain. For example, the extent of purely private welfare activity within personal social services does not capture the extent of unpaid care and support provided through informal kinship and support networks (cf. Powell, Reference Powell and Seeleib-Kaiser2008: 29).

Publicness perspectives

Publicness is largely absent from social policy literature. For example, Newman and Clarke (Reference Newman and Clarke2009: 4) explore ‘public services as mediums of publicness’ without referring to the ‘publicness’ literature. There are ‘many faces of publicness’ (Pesch, Reference Pesch2005: 108), but it is often divided into core and dimensional approaches (e.g., Anderson, Reference Anderson2012; Andrews et al., Reference Andrews, Boyne and Walker2011). The traditional core definition is similar to a one-dimensional MEW focus on ownership (Pesch, Reference Pesch2005). A two-dimensional account focuses on economic and political authority (e.g., Pesch, Reference Pesch2005: 112). Bozeman (Reference Bozeman1987: 17) and argues that political control is the essence of publicness: ‘all organizations are public because political authority affects some of the behavior and processes of all organizations’. This has now developed into a ‘dimensional’ model of publicness that combines ownership (public, private or non-profit), funding, (government grants versus consumer payments) and control (by political or market forces). The model is dimensional in the sense that all three variables should be viewed as continuous rather than categorical. Thus, organisations can be more or less public on each of the three dimensions. This raises the question of which aspect of publicness is most important for organisational performance, and whether each one has separate or interactive effects (Andrews et al., Reference Andrews, Boyne and Walker2011). Anderson (Reference Anderson2012) has produced a two-dimensional grid for healthcare organisations. He argues that a distinction can be made between hospitals with Foundation Trust (FT) status, having increased economic authority but reduced political authority, and those under direct NHS control, and subject to high levels of both economic and political authority. This suggests some decline in publicness as FTs are less public than non-FT hospitals.

Figure 2.

Dimensional model of publicness

According to Andrews et al. (Reference Andrews, Boyne and Walker2011) the number of studies that directly compare public and private effects on performance in the same industry and over the same time period is not great. Furthermore, most studies focus only on ownership while neglecting the funding and control dimensions of publicness, and examine effects on efficiency and effectiveness without paying much attention to equity. They conclude that the existing evidence suggests that publicness makes little difference to performance. However, such results should be treated cautiously as the consequence of substantive and methodological problems is that it is impossible to conclude with any confidence that publicness makes a positive or negative difference to organisational performance or to judge which of the three dimensions of publicness is most important and for which aspects of organisational performance.

Privatisation and the NHS

It is clear that the NHS has never been solely ‘purely public’ (e.g., GPs as independent contractors; ‘pay beds’ within NHS hospitals; ‘out of pocket’ expenses or charges for prescriptions, and ‘high street’ pharmacy, dental and optical care [Salter, Reference Salter1998; Keen et al., Reference Keen, Light and Mays2001]). However, most commentators date privatisation from the Conservative (1979–1997) government (e.g., Pollock, Reference Pollock2005). Subsequent discussion focuses on this period onwards (although later periods focus on the English NHS after political devolution: see e.g., Lister, Reference Lister2008: chapter 8). For reasons of space, the focus is on health care rather than ‘continuing care’ at the health/ social care boundary which has been termed ‘the biggest area of privatisation’ (Lister, Reference Lister2008: 66; but see Timmins, Reference Timmins2001; Klein, Reference Klein2013), In this chronological section, we examine privatisation in terms of the original debates (i.e., with explanations – or no explanations – from the original authors). It is noticeable that few authors give a clear or explicit definition of privatisation or draw on the extant privatisation frameworks (above). We then apply our three perspectives in the ‘Discussion’ section.